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CST: 13/11/2019 18:56:59   

Oil States Announces Third Quarter 2019 Results of Operations

20 Days ago

HOUSTON, Oct. 24, 2019 (GLOBE NEWSWIRE) -- Oil States International, Inc. (NYSE: OIS) reported a net loss for the third quarter of 2019 of $31.9 million, or $0.54 per diluted share, on revenues of $263.7 million and Consolidated EBITDA (Note A) of $31.3 million. The reported third quarter 2019 results included a non-cash fixed asset impairment charge for the Drilling Services business of $33.7 million ($26.6 million after-tax, or $0.45 per diluted share) and severance and downsizing charges totaling $0.7 million ($0.5 million after-tax, or $0.01 per diluted share).

These results compare to reported net loss for the third quarter of 2018 of $4.0 million, or $0.07 per diluted share, on revenues of $274.6 million and Consolidated EBITDA of $27.6 million. The reported third quarter 2018 results included legal fees incurred for patent defense of $3.5 million ($2.8 million after-tax, or $0.05 per diluted share) and a reserve for prior years' Fair Labor Standards Act ("FLSA") claim settlements of $2.6 million ($2.1 million after-tax, or $0.03 per diluted share).

Third quarter 2019 highlights included:

  • Cash flow from operations totaling $49.9 million

  • Revolving credit facility net repayments totaling $34.2 million

  • Offshore/Manufactured Products backlog increase of 3.7%, with a 1.2x book-to-bill ratio for the quarter

  • Drilling Services non-cash fixed asset impairment charge of $33.7 million

Oil States’ President and Chief Executive Officer, Cindy B. Taylor, stated, "Our third quarter revenues were largely in-line with our previous guidance, but Consolidated EBITDA outperformed the mid-point of our estimates supported by sequential improvements in Gulf of Mexico and international Completion Services activity, along with increased sales of our project-driven products and other products and services in our Offshore/Manufactured Products segment. Our consolidated revenue was flat sequentially, but EBITDA grew 18% over the period, yielding very strong incrementals. We received one notable project award above $10 million during the quarter, our fourth such significant award won so far this year, leading to a 3.7% increase in backlog and a 1.2x book-to-bill ratio for the quarter, bringing us to a 1.5x book-to-bill ratio year-to-date. As of September 30, 2019 our backlog totaled $293.3 million, our highest level reported since March 31, 2016. In addition, we generated strong quarterly free cash flow, which was used to reduce debt."

BUSINESS SEGMENT RESULTS

(See Segment Data tables)

Offshore/Manufactured Products

Offshore/Manufactured Products generated revenues and Segment EBITDA (Note B) of $104.8 million and $16.9 million, respectively, in the third quarter of 2019 compared to revenues of $102.0 million and Segment EBITDA of $15.8 million reported in the second quarter of 2019. Revenues increased 2.8% while Segment EBITDA increased 6.5% sequentially, due to higher project-driven sales and other products and services revenues, coupled with improved facility cost absorption. Segment EBITDA margin in the third quarter of 2019 was 16.1%, up from 15.5% reported in the second quarter of 2019.

Notable backlog additions during the third quarter of 2019 included a military product award. Backlog increased 3.7% sequentially and 67.9% year-over-year, respectively, totaling $293.3 million at September 30, 2019 compared to $282.9 million at June 30, 2019, and $174.6 million at September 30, 2018. Third quarter 2019 bookings totaled $123.2 million, yielding a book-to-bill ratio of 1.2x.

Well Site Services

Well Site Services generated revenues of $116.0 million, Segment EBITDA of $20.2 million and a Segment EBITDA margin of 17.4% in the third quarter of 2019. This compares to revenues of $116.0 million, Segment EBITDA of $18.3 million and a Segment EBITDA margin of 15.8% reported in the second quarter of 2019. Results in the third quarter of 2019 benefited from improved Completion Services customer activity in international markets and the Gulf of Mexico, along with the benefits of continued cost reduction measures.

During the third quarter of 2019, the Company made the strategic decision to reduce the scope of its Drilling Services business (with plans to adjust from 34 rigs to 9 rigs) due to ongoing weakness in customer demand for vertical drilling units in the U.S. land market. As a result of this decision, the Drilling Services business recorded a non-cash impairment charge of $33.7 million to decrease the carrying value of the associated fixed assets.

Downhole Technologies

Downhole Technologies generated revenues of $42.9 million and Segment EBITDA of $6.0 million in the third quarter of 2019 compared to revenues and Segment EBITDA of $46.7 million and $3.8 million, respectively, in the second quarter of 2019. While EBITDA improved considerably, sequential revenue declines were realized as the segment experienced lower customer activity levels later in the third quarter. Segment EBITDA margin was 13.9% in the third quarter of 2019 compared to 8.1% in the second quarter of 2019. The second quarter 2019 Segment EBITDA margin was negatively impacted by $1.4 million of inventory write-offs associated with product design changes.

Income Taxes

The Company recognized an effective tax rate benefit of 16.3% in the third quarter of 2019 which compared to an effective tax rate benefit of 2.6% in the second quarter of 2019. The effective tax rate benefit for both periods was below the U.S. statutory rate primarily due to certain non-deductible expenses.

Financial Condition

As of September 30, 2019, $65.0 million was outstanding under the Company’s revolving credit facility, while cash on hand totaled $14.7 million. The Company repaid $34.2 million of borrowings outstanding under its revolving credit facility during the third quarter of 2019. As of September 30, 2019, the total amount available to be drawn under the revolving credit facility was $139.1 million. The Company's total debt represented 16.1% of combined total debt and stockholders' equity at September 30, 2019.

Conference Call Information

The call is scheduled for Friday, October 25, 2019 at 10:00 am Central Time, is being webcast and can be accessed from the Company’s website at www.ir.oilstatesintl.com. Participants may also join the conference call by dialing (888) 771-4371 in the United States or by dialing +1 847 585 4405 internationally and using the passcode 49128922. A replay of the conference call will be available one and a half hours after the completion of the call by dialing (888) 843-7419 in the United States or by dialing +1 630 652 3042 internationally and entering the passcode 49128922.

About Oil States

Oil States International, Inc. is a global products and services company predominantly serving the drilling, completion, subsea, production and infrastructure sectors of the oil and gas industry. The Company’s manufactured products include highly engineered capital equipment as well as products consumed in the drilling, well construction and production of oil and gas. The Company is also a leading researcher, developer and manufacturer of engineered solutions to connect the wellbore with the formation in oil and gas well completions. Oil States is headquartered in Houston, Texas with manufacturing and service facilities strategically located across the globe. Oil States is publicly traded on the New York Stock Exchange under the symbol “OIS”.

For more information on the Company, please visit Oil States International’s website at www.oilstatesintl.com.

Forward Looking Statements

The foregoing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that do not state historical facts and are, therefore, inherently subject to risks and uncertainties. The forward-looking statements included herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Such risks and uncertainties include, among others, the level of supply of and demand for oil and natural gas, fluctuations in the prices therefor and the cyclical nature of the oil and natural gas industry and the other risks associated with the general nature of the energy service industry discussed in the “Business” and “Risk Factors” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, Periodic Reports on Form 8-K and Quarterly Reports on Form 10-Q. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof, and, except as required by law, the Company undertakes no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments.


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)

  Three Months Ended   Nine Months Ended
  September 30,
 2019
  June 30,
 2019
  September 30,
 2018
  September 30,
 2019
  September 30,
 2018
Revenues:                  
Products $ 122,067     $ 124,965     $ 120,271     $ 363,360     $ 385,279  
Services 141,630     139,720     154,323     415,633     428,736  
  263,697     264,685     274,594     778,993     814,015  
                   
Costs and expenses:                  
Product costs 90,796     95,289     87,822     275,353     276,122  
Service costs 110,294     112,823     127,836     333,727     342,829  
Cost of revenues (exclusive of depreciation and amortization expense presented below) 201,090     208,112     215,658     609,080     618,951  
Selling, general and administrative expense 31,935     31,484     32,285     93,527     102,399  
Depreciation and amortization expense 31,366     31,883     30,586     94,800     90,698  
Impairment of fixed assets 33,697             33,697      
Other operating (income) expense, net 519     (399 )   (213 )   34     (2,097 )
  298,607     271,080     278,316     831,138     809,951  
Operating income (loss) (34,910 )   (6,395 )   (3,722 )   (52,145 )   4,064  
                   
Interest expense, net (4,352 )   (4,617 )   (4,843 )   (13,721 )   (14,087 )
Other income, net 1,190     1,009     709     2,866     1,927  
Loss before income taxes (38,072 )   (10,003 )   (7,856 )   (63,000 )   (8,096 )
Income tax benefit 6,204     263     3,837     6,744     3,327  
Net loss $ (31,868 )   $ (9,740 )   $ (4,019 )   $ (56,256 )   $ (4,769 )
                   
Net loss per share:                  
Basic $ (0.54 )   $ (0.16 )   $ (0.07 )   $ (0.95 )   $ (0.08 )
Diluted $ (0.54 )   $ (0.16 )   $ (0.07 )   $ (0.95 )   $ (0.08 )
                   
Weighted average number of common shares outstanding:                
Basic 59,423     59,406     59,026     59,362     58,606  
Diluted 59,423     59,406     59,026     59,362     58,606  


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Thousands)

  September 30, 2019   December 31, 2018
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 14,655     $ 19,316  
Accounts receivable, net 256,387     283,607  
Inventories, net 215,558     209,393  
Prepaid expenses and other current assets 18,802     21,715  
Total current assets 505,402     534,031  
       
Property, plant, and equipment, net 470,983     540,427  
Operating lease assets, net 45,497      
Goodwill, net 646,744     647,018  
Other intangible assets, net 236,159     255,301  
Other noncurrent assets 29,179     27,044  
Total assets $ 1,933,964     $ 2,003,821  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Current portion of long-term debt $ 25,591     $ 25,561  
Accounts payable 78,511     77,511  
Accrued liabilities 59,988     60,730  
Current operating lease liabilities 8,557      
Income taxes payable 5,385     3,072  
Deferred revenue 25,888     14,160  
Total current liabilities 203,920     181,034  
       
Long-term debt 239,596     306,177  
Long-term operating lease liabilities 37,230      
Deferred income taxes 41,604     53,831  
Other noncurrent liabilities 25,270     23,011  
Total liabilities 547,620     564,053  
       
Stockholders' equity:      
Common stock 726     718  
Additional paid-in capital 1,110,572     1,097,758  
Retained earnings 973,262     1,029,518  
Accumulated other comprehensive loss (76,932 )   (71,397 )
Treasury stock (621,284 )   (616,829 )
Total stockholders' equity 1,386,344     1,439,768  
Total liabilities and stockholders' equity $ 1,933,964     $ 2,003,821  


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

  Nine Months Ended September 30,
  2019   2018
Cash flows from operating activities:      
Net loss $ (56,256 )   $ (4,769 )
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization expense 94,800     90,698  
Impairment of fixed assets 33,697      
Stock-based compensation expense 12,822     16,554  
Amortization of debt discount and deferred financing costs 5,903     5,504  
Deferred income tax provision (benefit) (11,935 )   1,061  
Gain on disposals of assets (2,310 )   (5,046 )
Other, net 1,216     991  
Changes in operating assets and liabilities, net of effect from acquired businesses:      
Accounts receivable 24,993     (25,454 )
Inventories (6,867 )   (7,867 )
Accounts payable and accrued liabilities 3,143     18,311  
Income taxes payable 1,948     524  
Other operating assets and liabilities, net 14,740     (10,406 )
Net cash flows provided by operating activities 115,894     80,101  
       
Cash flows from investing activities:      
Capital expenditures (45,832 )   (71,286 )
Acquisitions of businesses, net of cash acquired     (379,676 )
Proceeds from disposition of property, plant and equipment 3,619     1,812  
Proceeds from flood insurance claims     3,589  
Other, net (1,534 )   (1,218 )
Net cash flows used in investing activities (43,747 )   (446,779 )
       
Cash flows from financing activities:      
Issuance of 1.50% convertible senior notes     200,000  
Purchase of 1.50% convertible senior notes (858 )    
Revolving credit facility borrowings 175,306     769,147  
Revolving credit facility repayments (246,450 )   (608,565 )
Other debt and finance lease repayments, net (434 )   (405 )
Payment of financing costs (18 )   (7,368 )
Purchase of treasury stock (757 )    
Shares added to treasury stock as a result of net share settlements
due to vesting of restricted stock
(3,698 )   (4,178 )
Net cash flows provided by (used in) financing activities (76,909 )   348,631  
       
Effect of exchange rate changes on cash and cash equivalents 101     849  
Net change in cash and cash equivalents (4,661 )   (17,198 )
Cash and cash equivalents, beginning of period 19,316     53,459  
Cash and cash equivalents, end of period $ 14,655     $ 36,261  
       
Cash paid for:      
Interest $ 8,378     $ 7,730  
Income taxes, net of refunds (2,522 )   2,369  


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

SEGMENT DATA
(In Thousands)
(unaudited)

  Three Months Ended   Nine Months Ended
  September 30,
 2019
  June 30,
 2019
  September 30,
 2018
  September 30,
 2019
  September 30,
 2018
Revenues:                  
Well Site Services:                  
Completion Services $ 103,966     $ 103,320     $ 111,669     $ 307,928     $ 302,877  
Drilling Services 12,034     12,646     16,920     32,430     51,235  
Total Well Site Services 116,000     115,966     128,589     340,358     354,112  
Downhole Technologies 42,882     46,740     56,571     143,912     161,626  
Offshore/Manufactured Products(1):                  
Project-driven products 39,474     38,517     22,277     105,236     98,301  
Short-cycle products 34,698     35,011     34,170     101,722     111,936  
Other products and services 30,643     28,451     32,987     87,765     88,040  
Total Offshore/Manufactured Products 104,815     101,979     89,434     294,723     298,277  
Total revenues $ 263,697     $ 264,685     $ 274,594     $ 778,993     $ 814,015  
                   
Operating income (loss):                  
Well Site Services:                  
Completion Services(2,3,4,5,6) $ 1,719     $ (507 )   $ (3,271 )   $ (2,282 )   $ (6,538 )
Drilling Services(2,5) (36,495 )   (2,601 )   (2,206 )   (43,655 )   (7,474 )
Total Well Site Services (34,776 )   (3,108 )   (5,477 )   (45,937 )   (14,012 )
Downhole Technologies(4,6) 659     (1,462 )   6,485     3,251     26,139  
Offshore/Manufactured Products(2,3,5,6) 11,139     9,809     7,069     26,207     32,185  
Corporate(6) (11,932 )   (11,634 )   (11,799 )   (35,666 )   (40,248 )
Total operating income (loss) $ (34,910 )   $ (6,395 )   $ (3,722 )   $ (52,145 )   $ 4,064  

(1) Disaggregated revenue data is provided to supplement the Segment Data.

(2) Operating income (loss) for the three months ended September 30, 2019 included severance and downsizing charges of $0.3 million related to the Completion Services business and $0.4 million related to the Offshore/Manufactured Products segment and a non-cash fixed asset impairment charge of $33.7 million related to the Drilling Services business.

(3) Operating income (loss) for the three months ended June 30, 2019 included severance charges of $0.3 million related to the Completion Services business and $1.0 million related to the Offshore/Manufactured Products segment.

(4) Operating income (loss) for the three months ended September 30, 2018 included $3.5 million of legal fees incurred for patent defense in the Downhole Technologies segment and $2.6 million in reserves for prior years' FLSA claims settlements related to the Completion Services business.

(5) Operating income (loss) for the nine months ended September 30, 2019 included severance and downsizing charges of $1.3 million related to the Completions Services business and $1.7 million related to the Offshore/Manufactured Products segment and a non-cash fixed asset impairment charge of $33.7 million related to the Drilling Services business.

(6) Operating income (loss) for the nine months ended September 30, 2018 included transaction-related expenses of $2.4 million and $0.2 million related to Corporate and the Downhole Technologies segment, respectively, as well as $5.9 million of legal fees incurred for patent defense in the Downhole Technologies segment, severance charges of $0.8 million related to the Offshore/Manufactured Products segment, and $3.3 million in reserves for prior years' FLSA claims settlements related to the Completion Services business.


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
SEGMENT EBITDA (B)
(In Thousands)
(unaudited)

  Three Months Ended   Nine Months Ended
  September 30,
 2019
  June 30,
 2019
  September 30,
 2018
  September 30,
 2019
  September 30,
 2018
Well Site Services:                  
Completion Services:                  
Operating income (loss) $ 1,719     $ (507 )   $ (3,271 )   $ (2,282 )   $ (6,538 )
Depreciation and amortization expense 17,024     17,248     16,884     51,558     49,082  
Other income 1,082     809     620     2,472     1,415  
EBITDA $ 19,825     $ 17,550     $ 14,233     $ 51,748     $ 43,959  
                   
Drilling Services:                  
Operating loss $ (36,495 )   $ (2,601 )   $ (2,206 )   $ (43,655 )   $ (7,474 )
Depreciation and amortization expense 3,164     3,224     3,479     9,729     10,898  
Impairment of fixed assets 33,697             33,697      
Other income (expense) 50     126     (1 )   197     379  
EBITDA $ 416     $ 749     $ 1,272     $ (32 )   $ 3,803  
                   
Total Well Site Services:                  
Operating loss $ (34,776 )   $ (3,108 )   $ (5,477 )   $ (45,937 )   $ (14,012 )
Depreciation and amortization expense 20,188     20,472     20,363     61,287     59,980  
Impairment of fixed assets 33,697             33,697      
Other income 1,132     935     619     2,669     1,794  
Segment EBITDA $ 20,241     $ 18,299     $ 15,505     $ 51,716     $ 47,762  
                   
Downhole Technologies:                  
Operating income (loss) $ 659     $ (1,462 )   $ 6,485     $ 3,251     $ 26,139  
Depreciation and amortization expense 5,309     5,256     4,582     15,631     12,998  
Other income (expense) (2 )   14     1     12     (12 )
Segment EBITDA $ 5,966     $ 3,808     $ 11,068     $ 18,894     $ 39,125  
                   
Offshore/Manufactured Products:                  
Operating income $ 11,139     $ 9,809     $ 7,069     $ 26,207     $ 32,185  
Depreciation and amortization expense 5,680     5,973     5,426     17,240     17,026  
Other income 60     60     89     185     145  
Segment EBITDA $ 16,879     $ 15,842     $ 12,584     $ 43,632     $ 49,356  
                   
Corporate:                  
Operating loss $ (11,932 )   $ (11,634 )   $ (11,799 )   $ (35,666 )   $ (40,248 )
Depreciation and amortization expense 189     182     215     642     694  
Other expense                  
EBITDA $ (11,743 )   $ (11,452 )   $ (11,584 )   $ (35,024 )   $ (39,554 )


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In Thousands)
(unaudited)

  Three Months Ended   Nine Months Ended
  September 30,
 2019
  June 30,
 2019
  September 30,
 2018
  September 30,
 2019
  September 30,
 2018
                   
Net loss $ (31,868 )   $ (9,740 )   $ (4,019 )   $ (56,256 )   $ (4,769 )
Income tax benefit (6,204 )   (263 )   (3,837 )   (6,744 )   (3,327 )
Depreciation and amortization expense 31,366     31,883     30,586     94,800     90,698  
Impairment of fixed assets 33,697             33,697      
Interest expense, net 4,352     4,617     4,843     13,721     14,087  
Consolidated EBITDA (A) $ 31,343     $ 26,497     $ 27,573     $ 79,218     $ 96,689  

(A) The term Consolidated EBITDA consists of net loss plus net interest expense, taxes, depreciation and amortization expense, and certain other items. Consolidated EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net loss or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, Consolidated EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included Consolidated EBITDA as a supplemental disclosure because its management believes that Consolidated EBITDA provides useful information regarding its ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates. The Company uses Consolidated EBITDA to compare and to monitor the performance of the Company and its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan. The table above sets forth a reconciliation of Consolidated EBITDA to net loss, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.

(B) The terms EBITDA and Segment EBITDA consist of operating income (loss) plus depreciation and amortization expense, and certain other items. EBITDA and Segment EBITDA are not measures of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for operating income (loss) or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, EBITDA and Segment EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA and Segment EBITDA as a supplemental disclosure because its management believes that EBITDA and Segment EBITDA provide useful information regarding its ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates. The Company uses EBITDA and Segment EBITDA to compare and to monitor the performance of its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan. The tables above set forth reconciliations of EBITDA and Segment EBITDA to operating income (loss), which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.

Company Contact:
Lloyd A. Hajdik
Oil States International, Inc.
Executive Vice President, Chief Financial Officer and Treasurer
713-652-0582

Patricia Gil
Oil States International, Inc.
Director, Investor Relations
713-470-4860

SOURCE: Oil States International, Inc.

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